Monday, February 04, 2008
Edge Principles: Advantage is in the DNA, Yahoo + Microsoft Edition
So I've got a lot of comments and emails basically saying that you guys think that when I argue DNA will prevent Microsoft + Yahoo from creating value, I mean "culture".
That's inaccurate, so let me be (a lot) more precise - and skip to the end of this post if you've heard this part before.
DNA is how we organize production and consumption.
Corpocracies have a specific DNA: vertical integration, elaborate hierarchy, and lots of cronyism.
Open source communities have another: no bosses, always-on negotiation, and open but deeply interdependent production.
So let's try and recast the Yahoo + MS argument.
The point isn't culture. Rather, it's that Yahoo and MS are - and will be jointly even more so - unable to shift from core to edge leverage.
Consider the simple fact that despite a decade of countless billions spent trying, neither one has built a market, network, or community that ever really worked.
Why? Because they're already organized on a dying industrial paradigm. Yahoo is the ultimate siloed organization, where bureaucracy and fragmentation stifle radical innovation - perhaps the ultimate source of it's paralysis.
See the point? DNA is about how we manage - how we organize and manage production and consumption.
Google's Achilles heel is communities - but it's competence in assembling markets and networks is absolutely unparalleled. Again, the cause is DNA: Google manages consumption and production in radically different ways than almost anyone else in the economy, save Craigslist.
Google has a genetic makeup that lets it leverage the edge almost reflexively - but Microsoft and Yahoo have a genetic makeup that already organize production and consumption in a very specific way: according to the dying logic of an industrial massconomy.
Now, how does this affect strategy?
All the things everyone's ascribing to this deal - scale, etc - those are yesterday's sources of advantage.
The power of Google's DNA is that it lets Google tap entirely new sources of advantage.
A simple example. Even if Yahoo + MS combined had a larger market share than Google, who would be more likely to redefine brands? Of course - Google - because experimentation is hardwired into it's nervous system. The value of scale is constrained by DNA.
That's the point: in the edgeconomy, advantage is in the DNA.
Let's reverse that. Conversely, new DNA is yielding radically new sources of advantage, which dominate the network logic of a massconomy - and utterly eviscerate yesterday's sources of advantage, which are slowly dying in the ashes of the massconomy.
In that case, we should turn Yahoo! over to the Flickr people.
you got it - that's exactly the implication of these economics.
thx for the comment.
This is very clear....no one should ever mistake what you mean by corporate DNA again!! I love the analogy and believe that it would be good to have a Pandora-like set of descriptors to describe all of the elements of corporate DNA in the same way that Pandora's classification system is used to describe the Musical Genome (DNA).
re anon and flickr comment. We all wish it was that simple. Flickr can manage flickr but to put flickr people in charge of a mess they did not commit would be futile as well.
The post is great though.
why is google strongly protesting this merger if, in all likelihood, it could stand to benefit enormously.
Let me tell you a little tale about DNA I cooked up this weekend, Umair...my post on Algorithmically Human Societies
I'm getting increasingly appalled- there's the B.S. elevator pitch in my post, and then there was the Google Ad that came up right after I posted that post that said: "10,000 visitors for $12.50".
Forget value creation economics, Umair, we're building spam-conomics, and investors(be it Microsoft or your average VC) are funding it.
Can I say "Grrrr!!!"?
At the risk of spamming your blog...
here's another perspective I just wrote up, seeing as this whole YHOO+MSFT thing is bothering me in the stomach.
Umair - the DNA argument is an oversimplification. Google has grown so fast that it does not have any management processes. This is all fine and dandy while earnings are flying, stock is flying. Everybody is happy. If you believe that at some point the size and scope of their business will lead to a slowdown in earnings growth - you should also believe that they will have to become cost conscious. Once that happens, they will also become hierarchical and staid. The number of VPs will take off and we will be looking for another Google.
This is as much about age, as it is about DNA. DNA is a function of age.
Otherwise great article tainted by laughable jargon. Who will clone the DNA of the edgeconomy? I want a t-shirt that says 'massconomics'.
umair - do you find it at all ironic that some of the few that actually get
what you write are Yahoo! employees like Matt McAlister. I think Yahoo! has more "network" DNA in it's pinky finger than microsoft has in its whole body, and lumping those two together isnt't all that fair.
DNA is such a bad metaphor - sorry it just really inhibits my understanding of what this article is attempting to convey.
What's screwing with me:
2% of DNA codes proteins
40% of DNA is from RNA injection like retro viruses
So DNA is a hack of shit that just works to make us and then make us not die. What is the link between this and corporate politics?
Infact, considering the possibility that DNA offers TWEAKS to the human psyche - TWEAKS in our blood that make us better or worse - surely this is something mindless and rather unlike corporate politics - which is run by PEOPLE who are ALIVE and thinking.
I just don't understand what you're on about mate!